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Source: http://www.pmo.gov.il/PMOEng/Communication/Spokesman/2011/01/spokeshep100111.htm
Israeli Prime Minister's Statement on the Shepherd Hotel
(Prime Minister's Office) Actions undertaken at the Shepherd Hotel were conducted by private individuals in accordance with Israeli law. The Israeli government was not involved. There should be no expectation that the State of Israel will impose a ban on Jews purchasing private property in Jerusalem. No democratic government would impose such a ban on Jews and Israel will certainly not do so. Just as Arab residents of Jerusalem can buy or rent property in predominantly Jewish neighborhoods in Jerusalem, Jews can buy or rent property in predominantly Arab neighborhoods in Jerusalem.